S&P affirms UK AAA rating, cuts Bulgaria to junk

ChelseyDulaney

Standard & Poor's Ratings Services affirmed its triple-A debt ratings on the U.K., pointing to its wealthy and diversified economy, but lowered its ratings on Bulgaria to junk territory.

The ratings firm, which revised its outlook on the U.K. to stable from negative in June, said it expects the economy to expand by more than 3% this year and 2.7% in 2015 as domestic demand benefits from further job creation and private-sector wage growth gradually returns.

After years of poor growth, the U.K. has been a star performer this year, with output and employment growth exceeding S&P's expectations.

The government has made progress on consolidating public finances, though S&P expects the deficit to decline slower than the U.K.'s projections amidst lower tax receipts from the oil and financial service sectors.

S&P added Friday that the U.K.'s fiscal position has underperformed and isn't yet reflecting a strengthening economy. Officials at the Bank of England and economists have also acknowledged the possibility of a slowdown, as the world economy feels a chill from weakness in China and other emerging markets.

The two other major ratings firms, Moody's Investors Service and Fitch Ratings, both have the country's rating one notch lower. They stripped the U.K. of its premier rating in 2013, citing increasing levels of government debt at a time when the outlook for economic growth was deteriorating.

As for Bulgaria, S&P pointed to a weakening banking system that may require government support.

It cut the Eastern European country's foreign-currency sovereign rating by one notch to double-B-positive from triple-B-negative, with a stable outlook. S&P also cut Bulgaria's short-term debt and senior unsecured ratings.

The ratings firm said rising government debt and persistent deflation, coupled with weak economic growth, is posing a risk to the country's financial stability. S&P also cited runs on two of the country's largest banks--Corporate Commercial Bank and First Investment Bank--that required financing from the government as causes for concern.

The downgrade comes at a time of continued political uncertainty for Bulgaria, which has had five governments and two general elections since early 2013.

In a busy day for ratings, S&P also affirmed its triple-B-negative rating on South Africa. Some economists had been expecting a downgrade, as the country faces bleak assessments of its ability to repay its national debt. Meanwhile, the credit rater revised its outlook on Bahrain from stable to negative, saying falling oil prices could exacerbate weakness in the government's finances.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

Standard & Poor's Ratings Services affirmed its triple-A debt ratings on the U.K., pointing to its wealthy and diversified economy, but lowered its ratings on Bulgaria to junk territory.

The ratings firm, which revised its outlook on the U.K. to stable from negative in June, said it expects the economy to expand by more than 3% this year and 2.7% in 2015 as domestic demand benefits from further job creation and private-sector wage growth gradually returns.

After years of poor growth, the U.K. has been a star performer this year, with output and employment growth exceeding S&P's expectations.

The government has made progress on consolidating public finances, though S&P expects the deficit to decline slower than the U.K.'s projections amidst lower tax receipts from the oil and financial service sectors.

S&P added Friday that the U.K.'s fiscal position has underperformed and isn't yet reflecting a strengthening economy. Officials at the Bank of England and economists have also acknowledged the possibility of a slowdown, as the world economy feels a chill from weakness in China and other emerging markets.

The two other major ratings firms, Moody's Investors Service and Fitch Ratings, both have the country's rating one notch lower. They stripped the U.K. of its premier rating in 2013, citing increasing levels of government debt at a time when the outlook for economic growth was deteriorating.

As for Bulgaria, S&P pointed to a weakening banking system that may require government support.

It cut the Eastern European country's foreign-currency sovereign rating by one notch to double-B-positive from triple-B-negative, with a stable outlook. S&P also cut Bulgaria's short-term debt and senior unsecured ratings.

The ratings firm said rising government debt and persistent deflation, coupled with weak economic growth, is posing a risk to the country's financial stability. S&P also cited runs on two of the country's largest banks--Corporate Commercial Bank and First Investment Bank--that required financing from the government as causes for concern.

The downgrade comes at a time of continued political uncertainty for Bulgaria, which has had five governments and two general elections since early 2013.

In a busy day for ratings, S&P and Fitch also affirmed their ratings on South Africa. Some economists had been expecting a downgrade, as the country faces bleak assessments of its ability to repay its national debt. Meanwhile, the credit rater revised its outlook on Bahrain from stable to negative, saying falling oil prices could exacerbate weakness in the government's finances.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.